IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN
OPERATIONS IN THE VEGA FIELD, MESA COUNTY, COLORADO

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CAUSE
NO. 399

ORDER
NO. 399-2

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission
at 9:00 a.m. on May
10, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street,
Denver, Colorado, for an order to increase the number of wells which can be
optionally drilled into and produced from the Mesaverde Group (including the
Williams Fork, Cozzette and Corcoran Formations) for certain lands in Township
10 South, Range 93 West, 6th P.M., the equivalent of one Mesaverde
Formation well per 20 acres, with each well located no closer than 200 feet
from the boundaries of any lease line or from the boundaries of the application
lands and no closer than 400 feet from any existing Mesaverde Group well
without exception being granted by the Director of the Oil and Gas Conservation
Commission.

FINDINGS

The Commission finds as follows:

1. Delta
Petroleum Corporation ("Delta"), as applicant herein is an interested
party in the subject matter of the above-referenced hearing.

2. Due notice
of the time, place and purpose of the hearing has been given in all respects as
required by law.

3. The Commission has jurisdiction over the subject
matter embraced in said Notice, and of the parties interested therein, and
jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil
and Gas Conservation Act.

4.Rule 318.a.
of the Rules and Regulations of the Commission requires that wells drilled in
excess of 2,500 feet in depth be located not less than 600 feet from any lease
line, and located not less than 1,200 feet from any other producible or
drilling oil or gas well when drilling to the same common source of
supply.Certain lands in Township 10
South, Range 93 West, 6th P.M. are subject to this rule.

5. On April 11,
1977, the Bureau of Land Management approved the Vega Unit as a federal
exploratory unit.The Vega Unit has been
contracted to the following lands:

Township 9 South, Range 93 West, 6th P. M.

Section 33:E½
E½

Section 34: All

Section 35:W½,
SE¼, S½ NE¼

Township 10 South, Range 93 West, 6th P. M.

Section3:Lots 1, 2, 3, 4 (N½ N½), S½
SW¼, SW¼ SE¼

Section4:SE¼ SW¼, S½ SE¼

Section9:NE¼, E½ NW¼, NE¼ SE¼

Section 10:N½, N½ SW¼, SE¼ SW¼, SE¼

6. On November 20, 2006,
Delta, by its attorney, filed with the Commission a verified application for an
order to allow the number of wells which can be optionally produced from the
Mesaverde Group (including the Williams Fork, Cozzette and Corcoran Formations)
the equivalent of one well per 20 acres, with the permitted wells to be located
downhole anywhere underlying the below-listed application lands but no closer
than 200 feet from any lease line or outer boundaries of the application lands
and no closer than 400 feet from any existing Mesaverde Group well, without
exception being granted by the Director.In addition, wells drilled on the application lands will be drilled from
the surface either vertically or directionally from no more than one multi-well
surface site per quarter quarter section unless exception is granted by the Director
of the Colorado Oil and Gas Conservation Commission.On February 8, 2007, Delta Petroleum
Corporation, by its attorney, filed with the Commission a correction to the
legal description in Sections 15 and 16 of the application lands.

7.On December
22, 2006, EnCana Oil & Gas (USA) Inc. (“EnCana”), by its attorney, filed
with the Commission a protest to the application.

8.On December
26, 2006, Delta, by its attorney, filed with the Commission a written request
to continue this matter to the February hearing and the hearing in this matter
was continued.On January 15, 2007,
Delta, by its attorney, filed a verbal request to continue this matter to the
March hearing, and the hearing in this matter was continued.On March 19, 2007, Delta, by its attorney,
filed a written request to continue this matter to the May hearing and the
hearing was continued.

9.On April 26,
2007, EnCana, by its attorney, withdrew its protest to the application as the
parties had reached a settlement resolving their differences.

10.On April 24,
2007, Delta, by its attorney, filed with the Commission a written request to
approve the application based on the merits of the verified application and the
supporting exhibits.Sworn written
testimony and exhibits were submitted in support of the application.

11. Testimony and exhibits submitted in support of
the application showed that Delta is the 100% leasehold owner in the
application lands.

12. Testimony
and exhibits submitted in support of the application showed that the Williams
Fork, Cozzette and Corcoran Formations are subsections of the Mesaverde Group.

13. Testimony
and exhibits submitted in support of the application showed that the Mesaverde
Group is between 3,000 and 3,500 feet thick in the application area.

14. Testimony
and exhibits submitted in support of the application showed that the estimated Williams
Fork, Cozzette and Corcoran Formations reserves for the application lands vary
from approximately 60 to 80 BCF
per section.

15. Testimony
and exhibits submitted in support of the application indicated low porosity of less
than 13%, with an average permeability less than 0.1 millidarcies.

16. Testimony
and exhibits submitted in support of the application at prior administrative
hearing(s) showed that hydraulically induced fractures will propagate in a
northwest-southeast orientation, creating an elliptical northwest-southeast
drainage pattern in the application area.Additional testimony indicated that although Delta has not yet compiled
reservoir pressure data for the application lands, it believes that the
pressures are analogous to pressure information gathered in the central part of
the Piceance Basin, specifically described in the reservoir engineering data presented
in the Williams Production RMT Company Report dated April 24, 2006.

17. Testimony
and exhibits submitted in support of the application showed that current well
density will not effectively drain the Williams Fork, Cozzette and Corcoran
Formations. Additional testimony indicated that an average of approximately 20 acres
are drained by one well in the application area.

18. Testimony
and exhibits submitted in support of the application showed that increasing
well density to 20 acres in the application area will increase the estimated
ultimate recovery per section for the Mesaverde Group, and that approximately
65% recovery of original gas in place will be possible.The application lands lie within the 1.2 BCF per
well area.

19.
Delta Petroleum Corporation agreed to be
bound by oral order of the Commission.

20. Based on
the facts stated in the verified application, having resolved the protest and
based on the Hearing Officer review of the application under Rule 511.b., the
Commission should enter an order to increase the number of wells which can be
optionally drilled into and produced from the Mesaverde Group (including the
Williams Fork, Cozzette and Corcoran Formations) for certain lands in Township
10 South, Range 93 West, 6th P.M., the equivalent of one Mesaverde
Formation well per 20 acres, with each well located no closer than 200 feet
from the boundaries of any lease line or from the boundaries of the application
lands and no closer than 400 feet from any existing Mesaverde Group well
without exception being granted by the Director of the Oil and Gas Conservation
Commission.

ORDER

NOW, THEREFORE, IT IS ORDERED, that additional wells
are hereby allowed to be optionally drilled into and produced from the Mesaverde
Group (including the Williams Fork, Cozzette and Corcoran Formations), for the
below-listed lands, the equivalent of one Williams Fork, Cozzette and Corcoran
Formation well per 20 acres, with each well located no closer than 200 feet
from the boundaries of any lease line and no closer than 400 feet from any
existing Mesaverde Group well without exception being granted by the Director
of the Oil and Gas Conservation Commission:

IT IS FURTHER ORDERED, that wells to be drilled under
this application shall be drilled from the surface either vertically or directionally
from no more than one well pad located on a given quarter quarter section
unless exception is granted by the Director of the Colorado Oil and Gas
Conservation Commission.

IT IS FURTHER ORDERED, that the provisions contained
in the above order shall become effective forthwith.

IT IS FURTHER ORDERED, that the Commission expressly
reserves its right, after notice and hearing, to alter, amend or repeal any
and/or all of the above orders.

IT IS FURTHER ORDERED, that under the State
Administrative Procedure Act the Commission considers this order to be final
agency action for purposes of judicial review within 30 days after the date
this order is mailed by the Commission.

IT IS FURTHER ORDERED, that an application for
reconsideration by the Commission of this order is not required prior to the
filing for judicial review.